This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the top of any article.

Goldman, BlackRock Reopen Euro Money Funds

Move reflects rise in yields on safest debt; German 3-month yield is back above zero for first time since May.

Goldman Sachs Group Inc. joined BlackRock Inc. in reopening euro-denominated money-market funds to new clients as yields on the safest debt rose.

BlackRock, the world’s biggest money manager, lifted a restriction on new investment in its 17.7 billion-euro ($24 billion) Institutional Euro Liquidity Fund this month, Mark Stockley, the firm’s head of international cash sales, said in an interview in London on Feb. 14. Goldman reopened its Euro Government Liquid Reserves fund to new subscriptions last week, spokeswoman Anisha Patel said by phone.

BlackRock placed restrictions on investors putting money into two euro-denominated funds in July, while Goldman shut its government fund, after the European Central Bank cut its deposit rate to nil and yields on the safest government debt tumbled. The yield on German three-month notes rose above zero percent last month for the first time since May as ECB policy makers left rates unchanged.

“We’ve seen a modest improvement in the short-dated euro market to the point where, in the prime fund, we’re able to place investments and are therefore accepting subscriptions,” said Stockley.

The one-month yield on BlackRock’s Euro Liquidity Fund was 0.15 percent in January, the New York-based firm said. BlackRock’s fund invests in top-rated commercial paper issued by governments, banks and companies and is the firm’s biggest money-market fund in the currency.

BlackRock is keeping restrictions imposed on its Euro Government Liquidity Fund, though it will monitor the market “until hopefully we see more signs of improvement,” Stockley said.

Goldman’s government fund has about 644 million euros under management and is open for clients to deposit 25 million euros a day each, the New York-based bank said. Its Euro Liquid Reserves Fund, which had a 25 million-euro daily limit, is now allowing inflows of 250 million euros per client per day. The fund manages about 10.1 billion euros, the company said.

Money-market funds invest in short-term, high-grade debt securities that are safe and liquid with the aim that clients are guaranteed their money back.

JPMorgan Chase & Co., the world’s biggest provider of money-market funds, also closed euro funds last year as it became more difficult to invest clients’ assets at a profit. The manager has since reopened its Euro Liquidity Fund, Euro Money Market Fund, Euro Liquid Market Fund and JPMorgan Series II Fund in euros, Jim Fuell, head of global liquidity EMEA, said by phone. The firm’s Euro Government Liquidity Fund remains closed to new money, he said.

“The restrictions that we put in place in July were in the best interest of all our shareholders and they were gradually relaxed over time,” Fuell said. The manager reopened the funds in November, when the market was indicating a very low likelihood of a further rate cut by the European Central Bank, he said.

President Mario Draghi said on Feb. 7 the decision to continue to hold rates at record low levels was unanimous and economic activity in the euro area should gradually recover this year. Gross domestic product in the region shrank 0.6 percent in the fourth quarter from the previous three months, the European Union’s statistics office in Luxembourg said Feb. 14, stoking appetite for the safest securities.

Bloomberg News

Copyright 2015 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Treasury & Risk

Treasury & Risk is an online publication and robust website designed to meet the information needs of finance, treasury, and risk management professionals. Our editorial content, delivered through multiple interactive channels, mixes strategic insights from thought leaders with in-depth analysis of best practices, original research projects, and case studies with corporate innovators.